As the books closed on 2017, the inventory of homes for sale on the East End was down and getting only lower, while the number of sales was up, and indicators pointed to robust buyer interest continuing into the new year.
Hamptons home sales reports for the fourth quarter of 2017 suggest that the year-end dip experienced in 2016 was only a blip and not a sign that the market is in retreat. Rather, the market is posting positive numbers and only looking up, as scarce inventory puts upward pressure on sales prices.
Industry professionals often attribute the Q4 2016 slowdown to pre-election jitters: Buyers and sellers, uncertain of the outcome of a presidential race and what it will mean for the economy, tend to sit out election years until the dust settles.
But another factor pros pointed to was unrealistic listing prices. As sellers agreed to reduce their asking prices from aspirational amounts to price tags that actually reflected their homes’ worth based on comparable home sales, the inventory moved.
“The funny thing about the Hamptons is, whether you’re in a high market or a low market, the owners sometimes tend to overprice,” said Cia Comnas, the executive managing director of Brown Harris Stevens of the Hamptons. “In a high market, they think, ‘Well, anything is achievable.’ And in a low market, I think they’re worried about being low-balled, so they tend to pad the pricing a little bit to prevent that.”
But after a year or two of it being a buyers’ market, the sellers are being more realistic and pricing realistically, Ms. Comnas said. “A lot of these sellers are not stressed by any means to sell, so they can afford to wait,” she said. However, she added that they finally reach a point when they are ready to move on.
The Hamptons market has continued to be active from November and December into January, which is unusual, Ms. Comnas observed.
Brown Harris Stevens saw the number of Q4 homes sales shoot up 26.8 percent in a year, from 313 to 397, and the average sales price rise 6.9 percent to $1,965,747. That adds up to the sales volume hiking 35.6 percent to $780,401,680.
However, back in Q4 2015, the total number of sales was 444—or 47 more sales than Q4 2017, according to Brown Harris Stevens. And back in Q4 2015, the sales volume was nearly $1.4 billion. So while 2017 ended strong, it was not a record-breaking fourth quarter.
Looking at the year as a whole, 2017 had 2,230 Hamptons homes sales, according to Douglas Elliman Real Estate. That beats the 2,039 sales in 2016 but falls short of 2014 and 2015, when the number of sales was 2,429 and 2,364, respectively. Back in 2008, the number of sales was just 1,178.
“Overall, housing prices are close to 2008 levels, but sales are up sharply across all markets compared to the onset of the financial crisis,” said Jonathan Miller of Miller Samuel Inc., the author of the Elliman report, in a statement. “I believe that strong sales activity is a much more important metric on the health of a market than prices are, since sales volume improves first.”
Elliman reports that, in the Hamptons, Q4 2017 was the 10th consecutive quarter of declining inventory; the inventory fell to 756, down 42.5 percent compared to Q4 2016.
Elliman found that the number of sales rose 5.3 percent—up to 552—in the fourth quarter, compared to the same quarter a year prior. The median sales price increased 7.6 percent to $995,000 and the average sales price rose 9.7 percent, to $1,839,641.
The single-family housing market, specifically, had a 7.5 percent increase in sales, reaching 547 homes sold in the quarter, according to Elliman. Meanwhile, condo sales slipped 66.7 percent, from 15 to five. But in the fourth quarter of 2016 the condo inventory was 56, and at the end of 2017 it was just 33—so the decline in sales may have more to do with scarce inventory than with declining buyer interest.
“We’ve seen an exceptionally strong condo market this year,” said Carl Benincasa, the regional vice president of sales for Douglas Elliman. “If you look, there was a commensurate drop in listing inventory. So, clearly, the attractive condos have already been purchased.”
Newly constructed luxury condos—attractive to buyers because of their location, convenience and size—came on the market in 2017, he noted.
Mr. Benincasa said the condo market was the most intriguing Hamptons market in 2017. “You’ve seen a drop in the fourth quarter, but I think that’s owed in many respects just to the fact that the previous three quarters had been so active,” he said. “So it’s sort of a relative drop. As far as year-over-year impression, the Hamptons condo market had an incredible year.”
Ms. Comnas pointed to a segment of the market where inventory is plentiful: newly built single-family homes north of Montauk Highway in the $3 million to $5 million range. “There are still a lot of people that want to buy brand-new houses, and for new construction north of the highway there is still a lot of inventory,” she said.
Buyers want new because they are reluctant to do renovation work when they purchase a home, according to Ms. Comnas. But she expects that the inventory of new single-family homes will keep up with demand.
Ernest Cervi, the regional senior vice president of Corcoran Group Real Estate’s East End offices, said that as the stock market has soared and the economy has improved, both first-time homebuyers and first-time second-home buyers have come out, looked at the inventory, and purchased. And, he added, the expectation that home prices are on their way up may have been another motivator.
In fact, he said that finding homes for under $1 million is harder, whether east of the Shinnecock Canal or west, where prices are typically lower.
“On both sides of the canal, the entry-level inventory—say, under $1 million—is the lightest,” Mr. Cervi said. “East of the canal, 44 percent of transactions were under a million, and, west of the canal, 74 percent of the transactions were a million and under.”
Undeveloped land is also increasingly difficult to find, and developers are eying the existing housing stock. “What’s happening is, scarcity of the land is driving people to look for houses that can be torn down and rebuilt, so we’re looking for other types of properties to replace raw land with,” Mr. Cervi said, noting that undeveloped parcels are especially scarce in the villages.
Old houses tend to have low ceilings, small closets and unfinished lower levels, he said. “These are things people don’t want today. They live differently.”
Town & Country reported a 36 percent jump in the number of Hamptons homes sales and a 43 percent jump in sales volume for Q4 2017 compared to Q4 2016, including only single-family homes.
Taking a look at 2017 on the whole compared to 2016, the number of homes sales was up 12 percent, and the total sales volume in dollars was up 10 percent, according to Town & Country.
One fine body…